A Review of the Nigerian Energy Industry

Legal challenges delay Chevron’s $1bn Nigeria oil block sale

Chevron logo14 January 2014, Lagos – Chevron faces delays in closing sales of oil blocks in Nigeria worth up to $1 billion because of legal disputes involving potential buyers, industry sources say, highlighting a risk other oil majors could face.

Chevron is joining competitors ConocoPhillips, Royal Dutch Shell, France’s Total and Italy’s Eni in disposing of stakes in onshore and shallow water offshore fields in the Niger Delta region.

OPEC-member Nigeria has the potential to double its 2 million-2.5 million barrel per day oil output in the next five years but problems with oil theft, pipeline sabotage and regulatory uncertainty are putting off investment.

Oil majors want to keep hold of the biggest producing fields, offshore assets and key pipelines and export terminals. But they are disposing of less profitable onshore blocks and fields that the government could strip from them if they remain undeveloped for ten years, notably in the restive Niger Delta.

Chevron has chosen its preferred bidders for the five blocks it put up for sale in June but the deals have not closed because rival firms have disputed its decision, with one taking the U.S. company to court, sources close to the deals said.

A Chevron spokeswoman said the company did not comment on ongoing transactions.

Nigerian firm Brittania-U, run by former Chevron executive Catherine Uju Ifejika, was the highest bidder at over $1 billion for the biggest cluster of blocks – OML 52, 53 and 55 – and Chevron began discussions with the company over the sale, two banking sources close to the deal said.

Chevron decided to look at alternative bids after Brittania-U did not show sufficient evidence it could muster the amount promptly, banking and oil industry sources said.

Brittania-U did not respond to requests for comment.

Chevron then agreed to sell the biggest block, OML 53, to Seplat, which is partly owned by French oil explorer Maurel & Prom and Swiss-based commodity trader Mercuria, while OML 52 would go to local firm Amni Petroleum and the smallest, OML 55, to Belema Oil, run by a local Delta community.

None of the companies responded to request for comment.

A Nigerian federal high court issued an interim injunction in December stopping Chevron from selling the blocks to Seplat and others after Brittania-U brought action against the U.S. major saying it had already agreed a deal to buy the assets, court documents showed.

Chevron could earn between $700 million and $900 million for the three blocks, two sources involved in bids said.

The three blocks had proven reserves of 555 million barrels of oil equivalent, with the biggest block OML 53 holding 310 million of those reserves, two oil industry sources said, citing a Chevron memorandum given to bidders.



– Daily Trust

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